What Fraction of a Capital Investment is Sunk Cost?
AbstractIn order to determine to what extent capital investments are sunk costs this study deals with salvage values of discarded metalworking machinery. Even though these assets are expected to be non-specific many of the discarded assets are scrapped rather than sold on second-hand markets. Econometric results suggests that firms can only expect to get back 20-50 percent of the initial price for a "new" machine once it is installed. The results also show differences in value-age profiles across firms, but give only weak support for the hypothesis that salvage values are particularly low in recessions.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 68.
Length: 27 pages
Date of creation: Sep 1995
Date of revision: 24 Sep 1999
Publication status: Published in Journal of Industrial Economics, 2000, pages 287-304.
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More information through EDIRC
Sunk cost; second-hand market; salvage value; machine tools;
Other versions of this item:
- Asplund, Marcus, 2000. "What Fraction of a Capital Investment Is Sunk Costs?," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 287-304, September.
- C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-01-24 (All new papers)
- NEP-IND-2000-01-24 (Industrial Organization)
- NEP-TID-2000-01-24 (Technology & Industrial Dynamics)
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